Commentary: Legislating Accountability and Reforms in Nonprofits

Commentary: Legislating Accountability and Reforms in Nonprofits

Article excerpt

In July, the U.S. Senate Finance Committee, headed by Sens.
Charles Grassley, R-Iowa, and Max Baucus, D-Mont., began the process
of drafting legislation for Charity Oversight and Reform.

The committee has produced a white paper entitled Tax Exempt
Governance Proposals. It has received high interest and debate from
such organizations as Independent Sector, BoardSource, Council on
Foundations, the Alliance for Nonprofit Management and the National
Council of Nonprofit Associations.

Concern for oversight and reform stems from abuses that are well
known in the corporate sector and in the nonprofit sector as well.
Some of the proposed provisions are welcome - for example it
proposes $25 million in funding for state and national management
support organizations, along with local capacity building
organizations. It also recommends $10 million to support
accreditation programs.

It's obvious from the abuses we see that there's been no check on
charities, Grassley said. Big money, tax-free, and no oversight have
created a cesspool in too many cases. It's alarming to see tax-
exempt organizations become willing partners in tax shelters used by
corporations and wealthy individuals to avoid or minimize their
taxes. We see powerful insiders using the assets of charities to
line their own pockets instead of to help the needy. Donations and
assets are being used for things like private jets and European
vacations. We have to clean this up so charities keep the trust of
the American people.

An Iowa expert testified that reforms of nonprofits should
improve accountability without imposing more federal regulations
that cash-strapped, under-staffed charities can ill-afford. Willard
L. Boyd is professor of law and president emeritus of the University
of Iowa, director of The Larned A. Waterman Iowa Nonprofit Resource
Center, and chair of the Iowa Governor's Task Force on the Role of
Nonprofit Organizations in Iowa.

Grassley said he understood the importance of preventing the
manipulation of nonprofits while not overwhelming the ability of
charities, especially small charities, to achieve their important
missions.

Finding that balance will be the task in the weeks ahead,
Grassley said. My hope is to work with the nonprofit sector to find
that balance. Then I hope to introduce legislative reforms this
fall, and maybe even earlier for some provisions. …